Barclays' Q2 profit halved by non-core loss of $1.8b

Barclays CEO Staley aims to close the loss-making non-core division by the end of next year, allowing investors to focus more on British retail banking, credit cards and a transatlantic investment bank.
Barclays CEO Staley aims to close the loss-making non-core division by the end of next year, allowing investors to focus more on British retail banking, credit cards and a transatlantic investment bank.PHOTO: AGENCE FRANCE-PRESSE

LONDON • Barclays said profit fell by more than half in the second quarter as the bank posted a £1.1 billion (S$1.8 billion) pre-tax loss from the unit that houses the businesses and assets it is trying to sell or wind down.

Pre-tax profit, excluding notable items, fell to £763 million from £1.62 billion a year ago, the lender said in a statement yesterday. That missed the £985 million average estimate of six analysts compiled by Bloomberg.

Chief executive officer Jes Staley in March cut the firm's dividend in half to give the bank more capital to absorb losses from a quicker rundown of the non-core unit.

He aims to close that division by the end of next year, allowing investors to focus more on the bank's central businesses of United Kingdom retail banking, credit cards and a transatlantic investment bank.

"Non-core rundown - the key to unlocking the full earnings power of that core - has good momentum, and we remain committed to closing the unit in 2017," Mr Staley, 59, said in the statement.

Barclays shares climbed 4.2 per cent at 8.06am in London.

The bank's core units posted adjusted pre-tax profit of £1.85 billion. While that was down 7.5 per cent from a year earlier, it was 10 per cent higher than estimates, JPMorgan Chase analysts led by Mr Raul Sinha wrote in a note to clients. Revenue from those units was little changed.

The non-core loss of £1.1 billion exceeded estimates of £700 million, Mr Sinha wrote. The bank said it expects costs at that unit to drop to a range of £400 million to £500 million next year.

Barclays corporate and international unit, which houses the investment bank and non-retail operations outside Britain, made a profit of £1.7 billion in the quarter, down from £1.9 billion a year earlier.

Mr Staley's nascent turnaround effort at Barclays was dealt a blow by Britain's vote last month to leave the European Union, just months after he decided to retreat from Asia and Africa and refocus on the UK to revive profitability.

With the country now heading for a recession and questions over whether the investment bank will be allowed to continue doing business across Europe from London, analysts have slashed the firm's earnings outlook and called for deeper cost cuts.

"Brexit will be another issue that will require us to adjust how we do our business in Europe, but I'm very confident, because of the value we bring to Europe, that we will find a way together with the British government so that Barclays can remain an important presence across Europe," Mr Staley said.

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A version of this article appeared in the print edition of The Straits Times on July 30, 2016, with the headline 'Barclays' Q2 profit halved by non-core loss of $1.8b'. Print Edition | Subscribe